• Fri. Mar 1st, 2024

Grayscale Will Appeal SEC Lawsuit If Court Rejects Case

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Jan 24, 2023

The chief executive officer of Grayscale Investments said that the crypto asset manager is prepared for a legal battle with the US Securities and Exchange Commission (SEC) for creating spot bitcoin ETF (exchange-traded fund).

The company filed a lawsuit against the SEC in June and is awaiting a court ruling on it.

Meanwhile, Michael Sonnenshein, the CEO, said that they were ready to appeal if the court supported the decision of the SEC to reject the proposal for a Bitcoin ETF.

The CEO

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The Grayscale boss said that the SEC had not left them with any other option because it had not been right on their part to turn down their application.

Sonnenshein added that choosing to file the lawsuit against the regulatory agency was one of the most important decisions he had taken in his position.

He added that he did not take this decision lightly and neither did the rest of his team. He also added that they were confident that the court’s ruling would be in favor of the company.

In June, the SEC turned down Grayscale’s application for converting its flagship Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund.

The agency had stated that the proposal put forward was not in accordance with the standards that had been designed for protecting investors and preventing fraudulent practices.

Lawsuit

Almost immediately, Grayscale had taken the decision to file a lawsuit against the SEC for the rejection and had claimed that the agency had been acting arbitrarily in rejecting spot Bitcoin ETF applications, even though it had granted approval for bitcoin futures ETFs.

The lawsuit has been filed in the Court of Appeals of the District of Columbia. If an appeal is filed by either one of the parties, the case would then go to an en banc panel review or the US Supreme Court.

On March 7th, oral arguments in the case will take place and Sonnenshein said that they were expecting a final ruling to come in the fall.

According to the crypto asset manager’s website, the total assets under its management stand at a value of $14.5 billion.

The discount of the GBTC to bitcoin is currently around 41%, as it came under pressure after the collapse of the crypto exchange FTX and the subsequent withdrawal suspension of Genesis.

Crypto contagion

There have been more concerns about the contagion in the crypto market. Digital Currency Group (DCG) owns both Grayscale and Genesis.

The discount has also been impacted due to worries about DCG being under pressure to sell its GBTC holdings. The crypto lending unit of Genesis filed for bankruptcy this month.

Sonnenshein clarified that Grayscale does not rely on Genesis or DCG for its operations, so it remains unaffected.

Nonetheless, a person familiar with the matter reported that Genesis owns outstanding GBTC shares of about 5%.

The CEO said that in case its legal battle does not turn out favorable, it will look for other ways to return some of the capital to GBTC shareholders.

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